Competition Commission torpedoes Cashbuild’s R1bn takeover of Pepkor's BUCO

play article
Subscribers can listen to this article
The Competition Commission has recommended that the R1.1 billion takeover deal of hardware company BUCO be blocked.
The Competition Commission has recommended that the R1.1 billion takeover deal of hardware company BUCO be blocked.
  • The Competition Commission has recommended that the R1.1 billion takeover deal of hardware company BUCO be blocked.
  • Cashbuild wanted to buy the company from Pepkor.
  • But the competition authority says the newly created giant will be able to squeeze suppliers. 

Pepkor’s sale of hardware chain The Building Company (BUCO) - which also owns TimberCity and Tiletoria - to Cashbuild must be blocked, the Competition Commission recommended to the Competition Tribunal.

Cashbuild would have paid R1.1 billion for BUCO as part of the deal.

With 228 stores in the country, Cashbuild is the largest hardware retailer in South Africa. BUCO is the second biggest. The transaction would have created a new largest retailer of building material, hardware and related products in South Africa.

"The proposed merger will result in the removal of BUCO as an effective competitor in the national market with the potential to expand and compete effectively in the market," the commission found.

It says that the takeover will create a dominant supplier of building material and related hardware products in many townships.

"This is because in these areas, independent retailers do not exert a significant competitive constraint to the merging parties. These include areas such as Alice, Sterkspruit, Acornhoek, Giyani, Lethlabile and Thabazimbi. Thus, the proposed merger will give the merging parties the ability to unilaterally increase prices or change trading terms in several geographic areas."

The merged company will also be able use its buyer power to squeeze the margins of their suppliers, particularly smaller suppliers who will now have to negotiate with the single largest retailer, the authority said.

In addition, the commission is concerned that the proposed new giant would undercut competitors in "key value items" such as cement, which is a footfall driver to hardware stores.

The Department of Trade Industry and Competition also filed a notice that – given that the deal will create the largest single retailer of building hardware in the country – it must come with "substantial" commitments to employment and transformation as well as the development of local products and suppliers.

"It should be noted that this is only a recommendation at this stage and the Competition Tribunal must still hear arguments from all parties before determining a ruling," Cashbuild said in a statement.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
Rand - Dollar
Rand - Pound
Rand - Euro
Rand - Aus dollar
Rand - Yen
Brent Crude
Top 40
All Share
Resource 10
Industrial 25
Financial 15
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Voting Booth
In light of the recent looting, do you think a basic income grant is the right approach to deal with SA’s hunger and poverty problems?
Please select an option Oops! Something went wrong, please try again later.
It will go a long way in helping fight the symptoms of SA’s entrenched inequality, especially for those who are starving right now
20% - 1271 votes
SA’s problems are complex, and we instead need to spend that money on building and growing our economy, which will help the country in the long run
31% - 2019 votes
All grants are a problem as they foster a reliance on handouts
49% - 3189 votes